California’s Fraud Problem: Part II Dan J. Harkey

Summary

The California Legislature is full of People who don’t know the Difference Between Earned Money by Taxpayers and Other People’s Money. They combine both funds and use them irresponsibly on waste, fraud, and abuse.

If you live or work in California, you already feel it.

Taxes are high. Insurance is expensive. Housing costs are crushing. Roads are deteriorating. Public services feel stretched—even after massive increases in government spending.

So where did the money go?

The uncomfortable answer: a significant portion never reached the people it was meant to help. It was lost to fraud, abuse, and preventable waste across major state programs.

This isn’t theory. It’s documented in audits, indictments, prosecutions, and government admissions.

The Basic Pattern

Through multiple programs, California followed the same playbook:

Expand spending rapidly
Relax or suspend basic checks
Delay oversight and verification
Respond after billions were already gone
Grow The Size and Intrusion of Government Through Adding 10s of thousands of employees

Fraud didn’t happen by accident. It happened because controls were removed before replacements were in place.

Unemployment Insurance: Billions Out the Door, Few Questions Asked

When COVID hit, California rushed out unemployment benefits. Speed was prioritized over verification.

Basic safeguards—identity checks, Employment validation, cross‑checks with prison databases—were delayed or skipped.

The result:

Benefits paid to organized crime rings
Payments are issued to prisoners, including convicted felons
Tens of billions in fraudulent or improper payments, by the state’s own admissions

Years later, auditors still flag the unemployment system as high risk, with ongoing fraudulent payouts.

Why this matters to you:
That money came from payroll taxes and federal funds tied to future taxation. Losses don’t disappear—they show up later as higher taxes, reduced services, or borrowing.

Medi‑Cal (Medicaid): Bigger Budget, Bigger Target

Medi‑Cal spending has exploded over the last several years. Eligibility rules were loosened. Asset limits were reduced. Certain approval requirements were suspended.

Those changes expanded access—but also opened the door to abuse.

Authorities have since charged individuals and businesses for:

Fake prescriptions
Billing for services never delivered
Kickback schemes
Enrolling ineligible recipients

Experts estimate that Medicaid fraud nationally accounts for 10–20% of spending. Even conservative assumptions translate into tens of billions of dollars at risk in California alone.

Why this matters to you:
Healthcare fraud drives up costs for everyone—higher taxes, higher premiums, fewer resources for legitimate patients.

In‑Home Supportive Services: Trust Without Verification

IHSS pays caregivers—often family members—to provide in‑home care. The work happens privately. Random checks are prohibited.

Oversight relies heavily on self‑reported timecards.

Audits and court cases have revealed:

Hours billed for care never provided
Payments after the recipients died
Claims submitted while recipients were hospitalized or incarcerated

Despite longstanding warnings, spending has surged while verification remains weak.

Why this matters to you:
Programs built entirely on Trust still require verification. Otherwise, honest caregivers subsidize dishonest ones—and taxpayers foot the bill.

Homelessness Spending: Billions Spent, Results Hard to Measure

California has spent roughly $24 billion on homelessness programs in recent years. Yet state auditors admit they cannot reliably measure outcomes for many initiatives.

That lack of accounting created fertile ground for abuse.

Prosecutors have charged:

Developers accused of siphoning public Housing funds
Nonprofit executives allegedly using taxpayer money for luxury lifestyles
Contractors operating with minimal oversight

Why this matters to you:
Every dollar diverted to fraud is a dollar not spent on Housing, mental health services, or addiction treatment that could actually reduce homelessness.

Food Assistance and Welfare: Expanding Benefits, Rising Fraud Risk

Food and cash assistance programs have doubled in cost over the past decade. Criminal networks have exploited electronic benefit systems to steal millions.

At the same time, proposed legislation has sought to reduce penalties for welfare fraud, raising concerns among enforcement officials.

Federal authorities have stepped in with task forces where state protections fell short.

Why this matters to you:

Fraud weakens public support for programs that genuinely help people—and increases political pressure for cuts that harm legitimate recipients.

What This Isn’t

This is not an argument against helping people. It’s not anti‑welfare. It’s not about partisanship.

It’s about basic stewardship of taxpayer money.

Well‑run programs help the vulnerable and protect the public. Poorly run programs do neither.

The Core Problem

California doesn’t lack compassion. It lacks accountability and urgency.

Auditors warned early. Controls existed but weren’t enforced. Reforms came late—after losses mounted.

Fraud became systemic because nobody treated it as an emergency until after the money was gone.

Why Borrowers and Taxpayers Should Care

If you:

Pay taxes
Own or rent property
Buy insurance
Run a business
Rely on public services

Then you are paying for this—directly or indirectly.

Fraud today becomes:

Higher taxes tomorrow
Fewer services later
More debt passed forward